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The hiring subsidy that the Liberals introduced in the spring of 2021 was always a bit of a mystery.

For starters, there was the name. The Canada Recovery Hiring Program, a pandemic relief program for businesses, was not actually a hiring subsidy; it was a payroll subsidy. Companies that didn’t hire any new employees were eligible for payments (so long as they increased payroll costs in other officially approved ways), while new firms weren’t eligible at all. Then there was the question of timing. Unemployment was already declining when Ottawa announced the program, and was sharply lower in the fall, when Finance Minister Chrystia Freeland extended the CRHP by six months.

And then there was the mystery of the program’s accounting. Despite promises, there were never regular updates on how the CRHP was being used, a stark contrast with the detailed data published for the much bigger Canada Emergency Wage Subsidy program. Finally, nearly 18 months after the program began, the Canada Revenue Agency has published data on the CRHP.

It’s now clear that the program was a bit of a dud, falling far short of projections. Ottawa originally forecast that the CRHP would cost $595-million. That forecast jumped to $2.17-billion when the program was extended in the December, 2021 economic update.

But the CRHP ended up disbursing less than half of that amount, a fact that Ottawa hasn’t quite concealed but hasn’t made terribly clear either. Last month’s economic update did disclose that the CRHP came in $637-million under budget. But what the government did not say in that document was that it had cut the program’s budget substantially in the spring, reducing forecast expenditures to $1.705-billion.

The Finance Department supplied that information in response to a query from The Globe and Mail, adding that the lowered forecast was included in a revision to 2021-22 program expenses in the spring budget. However, the changes to the CRHP and other programs were not broken out and separately disclosed.

So, the final accounting is this: $1.068-billion in payments were sent to Canadian businesses over the 11-month life of the program, 49 per cent of the $2.17-billion budget set in December, 2021.

Why such dismal performance? At least part of the reason has to do with the interaction with CEWS. Companies could collect one or the other in a given time period, with their claims automatically shunted to the most lucrative option when applying online. So, it’s no coincidence that CEWS ended up coming in $527-million over budget in fiscal 2021-22.

Taxing questions

Responding to last week’s lead newsletter item on the federal government imposing its own fuel charge in several Atlantic provinces, one online reader questioned what incentive consumers have to reduce their carbon footprints, since quarterly payments offset the directly attributable costs of the charge for a majority of households.

The economic incentives are pretty clear: you get the offset payments no matter what amount of carbon tax you pay. So, the more you take steps to reduce your carbon footprint, the more money you end up with in your pocket.

That said, you would have more of an incentive to reduce your carbon footprint if there were no payments – in other words, if your household income was marginally lower, and, consequently, the financial pain from fuel charges marginally higher.

That’s why lower-income households tend to have lower carbon footprints (and carbon costs) than higher-income households. Not (necessarily) because they have more virtue, but because they have less money.

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Drawing back clawbacks: Ottawa needs to reduce the pain of benefit clawbacks to better assist lower-income families with children, says a new report from the C.D. Howe Institute. The two authors, director of research Alexandre Laurin and research assistant Nicholas Dahir, note that the lower-earning parent in a family with three children could face a marginal effective tax rate in excess of 80 per cent. To reduce that financial disincentive to work, the authors recommend that the federal government: delay the onset of clawbacks under the Child Tax Benefit and the Canada Workers Benefit for a year after a recipient’s income rises; allow income averaging to smooth out spikes in earnings; and replace the federal childcare expense tax deduction with a refundable credit for childcare costs, tilted toward lower-income families.

Follow me on Twitter, @PatrickBrethour or ask your Taxing Question here.

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